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socrateaser
socrateaser, Lawyer
Category: Tax
Satisfied Customers: 33559
Experience:  Retired (mostly)
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I am rolling over a 401 k to a rollover ira. as I am retiring.

Customer Question

I am rolling over a 401 k to a rollover ira. as I am retiring. My company will allow me to rollover 80% of my vested balance and take 20% myself as they withhold 20% of it to pay to the IRS. This $80,000 amount payable to me will require us to pay approximately 40% of it in taxes as it will boost our taxable income. We already pay estimated income taxes of $3000 as we file as married jointly. Our income consists of 68000+ 95000 in job income as my job will be over in July and our estimated payments were calculated based on my expected earnings of approximately $117,000 which I earned last year. We also have approximately 16000 in capital gains /stock sales. This distribution would place our income at $254,000 and I want to see if I can make a payment through a check to the IRS to cover this additional tax payable If I take this distribution in August, I want to pay all that I owe for this year without a penalty for next year. Please help me as I am very worried. Thank you
Submitted: 1 year ago.
Category: Tax
Expert:  socrateaser replied 1 year ago.
Hello,

I understand your concern, however, it's not clear to me what question you have. Are you looking for an estimate of your year-end tax liability?

Also, have you considered taking your distribution in incremental amounts over your estimated lifespan, as a means of reducing your current tax liability?

Thanks in advance.
Customer: replied 1 year ago.

I am looking for an estimate of my year end tax liability

Expert:  socrateaser replied 1 year ago.
Sorry for the delay.

I estimate your combined Federal and Hawaii taxes, after deducting $6,000 in already-made estimated payments, as follows:

Gross Income $256,000.00
Total Tax (Pre-Credits) $74,077.10
Total Owed Tax $68,077.10
After-Tax Income $187,922.90
Effective Tax Rate 28.94%

Note that I have no idea what your deductions are, so I have used the standard deduction for married persons under 65 years of age. If you itemize deductions, then that could substantially lower your tax liability.

Also, if your work ends in July, then I would assume your earnings for the year would be cut in half from the $95,000 that you estimate. If that's true, then this would also lower your tax liability.

Please let me know if I can be of further assistance.

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